Correlation Between Central Garden and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Central Garden and Lamb Weston at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Central Garden and Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Garden Pet and Lamb Weston Holdings, you can compare the effects of market volatilities on Central Garden and Lamb Weston and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Central Garden with a short position of Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Lamb Weston.
Diversification Opportunities for Central Garden and Lamb Weston
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and Lamb is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Central Garden is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Central Garden Pet are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Central Garden i.e., Central Garden and Lamb Weston go up and down completely randomly.
Pair Corralation between Central Garden and Lamb Weston
Assuming the 90 days horizon Central Garden Pet is expected to generate 0.78 times more return on investment than Lamb Weston. However, Central Garden Pet is 1.28 times less risky than Lamb Weston. It trades about 0.03 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.02 per unit of risk. If you would invest 2,853 in Central Garden Pet on August 31, 2024 and sell it today you would earn a total of 560.00 from holding Central Garden Pet or generate 19.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Garden Pet vs. Lamb Weston Holdings
Performance |
| Timeline |
| Central Garden Pet |
| Lamb Weston Holdings |
Central Garden and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and Lamb Weston
The main advantage of trading using opposite Central Garden and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, Lamb Weston can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lamb Weston will offset losses from the drop in Lamb Weston's long position.| Central Garden vs. Seneca Foods Corp | Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack |
| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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